A Futures Contract

question 48

Multiple Choice

A futures contract

• A)​is not traded on an organized exchange and is customized to meet the needs of the parties.
• B)​is not traded on an organized exchange and is subject to formal regulations which results in standardized contrasts.
• C)​is traded on an organized exchange and is subject to formal regulations which results in standardized contrasts.
• D)​is traded on an organized exchange and is customized to meet the needs of the parties.

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Definitions:

Rate of Return

The gain or loss on an investment over a specified period, expressed as a percentage of the investment’s cost.

Portfolio Beta

A measure of the volatility of a portfolio compared to the market as a whole, indicating the expected percentage change in a portfolio's value for a 1% change in the market.

Alpha

A measure of the active return on an investment, gauging how much a portfolio or fund outperforms or underperforms its benchmark index.

Hedge Fund

An investment fund that employs various strategies to produce high returns, including leverage, short-selling, and derivatives, accessible typically to wealthy investors.